Lessons

Lesson Info

Legal Entities

we've got a lot of information to cover I know you guys are overwhelmed we talked on the on the break but it's only gonna get worse I got I got news for you so let's let's keep going here legal entities how are you operating your business today now I'm going to let everybody know I am not an attorney but I play one on tv okay so just all seriousness talk to an attorney get yourselves going but I'm gonna give you my advice if you will so most of you are probably operating as sole proprietors and that is a problem you are exposing yourselves to massive legal exposure so all of you I think we took this pole you're the only one not a sole proprietor you guys are and you have to understand someone khun trip on your bag that can happen you could be at a wedding someone khun trip and fall you can be in a wedding can you miss the first kiss right it's happened me I've missed the first kiss okay it happens there's nothing you can do I don't want to lose everything I own because I missed the fir...

st kiss can you lose a memory card I have had that happen to me frantically okay I'm when I'm photographing I'm laying down in the middle of street I'm taking pictures right I had a memory card in my pocket because I had swapped while I was away from my bag so I swapped cars I was cards I was laying down in the street card fell debt out of my pocket okay I get home I'm downloading images I realized I'm a memory card short there's three hundred image is on that card oh my god I did not wanna have to go back to my client say that it was like ten thirty eleven o'clock at night I had to rush back over forty minute drive to where I was because I knew what happened I knew I was laying down and I knew that's where I lost it it was sitting there still in the middle of the street uh thank god I found that card but my point is this can't happen but here's the reality we live in a legal system today right people want to sue anybody for anything I can sue you guys for sitting here today just staring at me right michele I don't like the way you're looking at me giving your giving me posttraumatic stress disorder I'm going to sue you okay and that's the reality that's what we live in today people consume anybody for anything so we've got to protect ourselves andi I want to talk about a recent harsh story it's going the person's going to remain name was this is a true problem going on our industry right now there is a photographer a wedding photographer he's currently being sued for three hundred thousand dollars in our industry is it your story by the way he's being sued for three hundred thousand dollars and in that lawsuit I would say he's not being sued he's probably blackmail see his the attorney said to one basically either you settle with me for forty thousand dollars I'm going to sue you for three hundred thousand dollars perfectly legal by the way in our legal system that is allowed to happen and so the problem is this retired from a two fundamental mistakes first and foremost okay he didn't have a contract he photographed this wedding with no contract and his client is an attorney maybe that's the first mistake right he shouldn't waste a just say no to attorneys we don't we don't photograph I'm kidding of course but I'm not kidding that his attorney his client was an attorney problem number two he was a true shoot and burner that day and what do I mean by that write he didn't call his images so if he took fifteen hundred images that day he went home burned all fifteen hundred two cd and handed them over to the client and I see a lot of you shaking your head right why because I don't know about you I make the same mistakes everybody else makes right I'm in the church of my thirty thirty two hundred so I run outside and take a picture right white screen okay right cause I didn't adjust my setting that happens to all of us by the way I'm taking a picture of the bride coming down the aisle the back walls in focus my bride is blurry we all make the same mistakes here's the difference I would never hand those images over my client we've got to remove those he didn't and so this is what's giving the lawsuit teeth because think about it no no judge no jury no court wants to make a ruling on what is good photography or what is bad photography but they know one thing for sure blurry images not good photography white blown out screen's not good photography so they can make that decision because what since he didn't have a contract with the client okay uh I'm gonna make a guess here I'm gonna assume for a second that if he doesn't have a wedding contract he probably also is not operating as a zoo corporation is probably operating as a sole proprietor so guess what this means if he loses this lawsuit for three hundred thousand dollars guess what more than likely he's going to be sued for future earnings right I would make the argument that none of us if we were losing three hundred thousand dollar lawsuit could afford to pay not three hundred thousand dollars up front and you might be thinking yourself if you're out there like dude sue me for whatever you want you can't get blood from a stone right you'll never get this for me not true the courts can actually rule and sue you for future earnings you have got to protect yourself protect your businesses protect your families this is just common sense and so let's go through this there's there's a multiple plethora of types of corporate organizations okay and so I'm just going to cover some that I think everybody hears about again I'm not an attorney I encourage you to go talk to one you can incorporate typically for less than a thousand dollars well worth the investment make the investment protect your assets because it only takes once think about this this lawsuit I'm telling you about for three hundred thousand dollars how much do you think he's probably spent on legal fees he's probably already spent you know where that forty thousand dollar number came up from the attorney who was suing him okay knows how much it costs to process a case so he's saying to him settle with me for forty k or I'm going to sue you for three hundred because he can do that because ultimately it's probably gonna cost him thirty to forty thousand dollars in legal fees so if I'm not person being sued I've got to make a decision this is business guys don't make it personal this can happen I have to make a business decision here well do I settle with him for thirty or forty thousand dollars ok and protect my name or do I go out there and argue this and fight this my name gets dragged through the mud I get all my clients gets what they see when you go on the internet if you google this photographer's name you know what comes back the lawsuit not even his website he's out of business he's done he screwed I can't have that happen in fact let's take it a step further in my wedding contract it states clearly I cannot be sued for more than you paid me it's got to be in all your contracts why would I want it why because I missed the first kiss what I want you to be able to sue me for three hundred thousand dollars that's insane I wouldn't want to be at risk more than I paid then you've paid me so the most someone consume me for if they do is the amount of money you've paid me not something else that could be in your contract right is ah mediation klaus meaning you have to go to a third party mediator before you can take me to court think about it if this is a legit lawsuit and I really did miss something I don't want to go through the courts the hassles hiring all these turns let's just go to a third party right mediation and a third independent third party here's our stories and renders a binding judgment that can work in your favor as well talk to an attorney about this stuff so so provider you're just operating as you are today you're independent business on your filing your taxes hopefully and declaring your income as part of your personal income statement right if you did twenty thousand dollars from photography thirty thousand dollars from photography you're filing that thirty thousand dollars is part of your personal tax returns okay that is a benefit by the way because you're being taxed as an individual that's great news because that's usually at a lower tax rate the flip side to that the negative of that is is if something were to go wrong you are sued as an individual which means all your personal assets are in play and none of us want that so we've got to change that well let's jump here to a corporation a corporation is just what you see in corporate america when you go to walmart when you goto right a car dealership these are actual corporations and the corporation is in fact its own entity right so when you deal with wal mart walmart almost has the same rights as an individual does it's its own legal entity you guys with me on that okay so it's operating that way but guess what here's the problem double taxation so warm a warm r and I'm not picking on one more but any corporation okay the plus side is you can't sue the ceo of the company directly right so if somebody trips and falls in a walmart I can't sue the ceo for that I sue wal mart wal mart is the entity being sued so the ceo is totally shielded and protected well your yours own ceo and we of course want you protected but here's the problem when your true corporation you're taxed twice the corporation pays taxes right the studio salvador cincotti photography is a corporation would pay taxes and then when south horse and cart photography pays me as an employee I would have to pay taxes so every dollar that comes in his tax twice well we don't want that okay enter an llc orin asked corporation these allow you the benefits of being an independent company an entity however with the taxation benefits of being individual so this is the best of both worlds now there's pros and cons to each of these an llc or an escort we are an escort here's the fundamental difference an llc is basically a limited liability corporation that llc will not live beyond the life of its main people it actually has a life span and I don't know what it is it's different in every state state some are ten years fifteen years but there's there's a life span for that corporation if one of the main principles dies so does that corporation well an escort doesn't have that limitation and as corp can live on forever again every state's different talked to an attorney I'm just giving you guidance here but here's the key here as an s corp I'm paid as an individual so I report my taxes on an individual level no double taxation and I know this stuff is boring I see I'm sure people are glazing over but this you have to protect your money every penny matters every penny counts here is the legal ramifications if someone were to trip and fall on my back if I were to miss a first kiss they cannot sue me personally that's important I don't want to lose my four oh one k my retirement plan I don't want to lose my home I don't wanna be sued for future earnings hey you bankrupt the business so be it right of course that's an unfortunate situation and we've got to plan for worst case scenario so go talk to an attorney make the decision on whether the llc or the s corp is better for you my personal opinion with all the research I've done I think the escort is the best scenario for most photographers in that situation so we are in fact an escort and it cost me less than a thousand dollars to set up that energy does that make sense questions because four of you are not these entities what has held you back I have spoke with uh my accountant and we had a meeting and then time got crazy so we never went forward with the meeting so I have spoke with him he was the one that brought it up to me from the very beginning he said you really need to get incorporated and and he you know encourage us to move forward so that that is something on our list of things to do so I'm I made a big note that it's very easy when you're starting off to ignore this because you think it's not important it starts off as a hobby like man it's just a hobby but men just think when your business owner your job is to think worst case scenario you have to be a pessimist if you're going to be a successful business owner you have to be a pessimist because my philosophy is simple if I can always be ok in worst case scenario then I'm always going to be okay right because if I've got a plan of attack when the wheels air falling off I'm going to be okay when things are going perfectly right what's what you are want what's held you back I had just just stuff on the side yeah and I think your story shall is very similar to what most people are right it's just I'm doing this on the side it's no big deal but man it only takes out one time for something to go wrong and you're screwed and you lose everything that you've been building so we've got to get you to protect yourself it was the same thing this is the first year that I'm really treating this as a true business um but my name isn't on the house or anything so it was never a big deal to teo incorporate because I had no fear of losing any future and now that you say future earnings that definitely gives me a red flag I need teo look more into incorporating and not stay as the sole proprietor good same thing I thought I have nothing to lose going right and then I never thought future earnings until you just said that good and then one of you my taxes last year they had kind of brought that up about incorporating so that is part of the plan for this here yeah and that needs to be part of your scalability plans so you'll hear me use a term like that what is your scale billy plan look you guys seen my business you see behind the scenes on the brakes and what we do there's three of us right four of us max that make all of this happened there's me my wife ah listen as my assistant and we have gage was back home he does our video stuff so there's four of us that really make this all happen so how do I grow my business how do my skill my business I gotta trust I gotta have an accounting team that does it I don't want to hire an accountant right but I need to have an accountant that helps me plan I need to have an attorney I don't want to pay an attorney full time but I need to have an attorney who's protecting me on the back and so you need to make that investment and it's your stories all of you by the way or what I hear all over the country when I'm touring like how she started off as a hobby it is not hey that's how all of us started but man it only takes once as soon as you get that through your head that it only takes once and I love that both of you were honest enough to say you know I'm like that what can you see me for who cares right soon as you start thinking about future earnings you're like oh man it's gonna get real quick so good good I'm glad questions yeah all right so we have so many questions from people on the legal part because it's hard to get access to this type of information and it's it's very important I just want to remind folks again that like you said sal earlier that this is not a legal class and check here I'm not an attorney but I do play one on tv like I said so a question from valerie fuller is what kind of protection would you recommend as a second shooter releasing of liability being sued etcetera yeah so the second shooter conundrum is a totally different conversation all together so we have a release form that we give to our second shooters that they have to sign because you're dealing with some other things as well like copyright okay if I'm paying a second shooter and again learn from my mistakes I got burned early on in my career I set up this amazing shot of this bride she was in a window she was looking sideways we got this great silhouette of her and my second shooter who was a hired gun at the time came behind me as I was laying on the floor took the shot and continued on I didn't think anything of it no big deal right he's my second shooter he should be covering all these things well I get to his maybe a month later two months later my bride calls me and she's like what the hell is my wedding picture doing on this website who is this person blob I mean she is lighting me up well gets a lot it was my second shooter he was using this image that I set up I created he was using it for all his marketing and advertising because it was a strong shot now I have nothing to protect myself none of you probably do so now we take great we go to great lengths to protect ourselves our second shooter sign a release form and in that release form it basically says we are paying you for this event you are an independent contractor on this event and we own all images produced by you during this event in return we're paying you this much money right so there has to be this give get they call it right I can't just say I own your images but not pay you for them because that won't work I won't hold up in a legal court of law so we're paying you is what we get in return but I take it a step further I don't let them use their memory cards when are you second chute for me you're using my memory cards that takes it all off the table to begin with now there's no way unless you're downloading memory cards behind my back which should be another red flag but there's no way you can screw me even by accident and so you need that release form for your second shooter's good question that's actually a great question quite a few questions about insurance I'm just going to read a few of them margene said isn't our insurance supposed to cover us for this sort of issue london london girl says to sell then have liability insurance and isn't the escort intended to make that irrelevant and then mariah smith says what if you have liability insurance and a limit of liability in your contracts do still need an llc yes all great questions and I think there's some confusion out there so let's say the s corp is in existence the s corp doesn't absolve the business from paying out any penalties paying out if a lawsuit were to come to fruition so let's say someone does sue me for two hundred thousand dollars and we lose that lawsuit who pays the two hundred thousand dollars one hundred thousand dollars hell five thousand dollars who pays that five thousand dollars if the business loses that lawsuit the business would have to pay that five thousand dollars one hundred thousand dollars liability insurance makes that painting for you that's the difference so even though I'm protected personally from my assets the business I mean let's be honest if I if my business were to lose a two hundred thousand dollar lawsuit and the business had to pay that lawsuit that might bankrupt my business two hundred grand in liquid capital I don't think most businesses could handle that kind of lawsuit that's where liability insurance comes in liability insurance comes in liability is gonna go here's your deductible you pay a thousand dollars of this we pay one hundred ninety nine thousand dollars of this so yes you need liability insurance on top of that danger both parts to that question now that's a really good quite these are actually really good question because I wasn't gonna talk about insurance on that's good so let me add to that a little bit on insurance not only do we have liability insurance we have our gear protected I would say at any given point in time I'm just trying to go through my gear closet what I have what I carry I want to say between studio lights and everything else we probably have a good forty to eighty thousand dollars worth of equipment right and that's been amassed over the last four or five years but we have all that equipment covered and it's part of our homeowners insurance so we have a rider on our policy and we set it up in an interesting way so you need to talk to your insurance provider so there's um insurance plans out there that force you to register every piece of equipment you buy holy cow that is a nightmare man because think about it we're always adding lenses into rotation pulling them out every time you had any lens you have to get a new quote for your insurance that became very cumbersome so I went to my insurance provider because we have our business insurance and everything else to them and I said man this doesn't work I need a blanket policy and what they did was they they gave me a fifty thousand dollars blanket policy it doesn't matter what equipment goes in or out of that policy there basically saying at any given point in time we will ensure you up to fifty thousand dollars and I felt like that was good because how often would I ever have all eighty thousand dollars of my equipment with me probably never and that's why I was okay with that less amount but you've gotto keep that in mind and connect with your insurance provider because that is very important man you could lose your equipment and lose a camera and what do you do what you do when you have a wedding this you know the upcoming weekend you're screwed you need that insurance so what the blanket policy did that eliminate I mean how did you when you do have new equipment that you need to account for is that something that you still need to get in contact with them and you know hey I got a new lens here that was the beauty about it the other policy we had when we first started out it was becoming so intense just on the administration of the policy I had new equipment all the time right little gadgets little chats and so you know my thing was it just became a challenge to start uh covering all this stuff so then I stopped submitting it and then I talk to my insurance broker and she's like no she is you understand though if you were to lose everything you've got a thirty thousand dollar gap that's not covered and so we still have to keep track of our um serial numbers and all that other stuff so we keep track of it internally but I don't have to keep submitting yeah it's really nice to talk to your insurance provider